California has strict regulations on gambling, and this includes a comprehensive legal framework governing lotteries. Under California Penal Code Sections 319 to 329, most forms of lotteries and games of chance are prohibited unless expressly authorized. Understanding these rules is essential for individuals and organizations that want to stay compliant with the law or determine whether a particular activity could result in criminal penalties.

What Is Considered a Lottery Under California Law?

California Penal Code Section 319 defines a lottery as any scheme for the distribution of property by chance among people who have paid—or promised to pay—valuable consideration for the opportunity to win. This includes common activities like:

• Raffles
• Gift enterprises
• Games involving the purchase of tickets, entries, or products with the chance to win prizes

Importantly, the name of the activity does not matter. Even if a scheme is not called a "lottery," it can still fall under this definition if it includes three core elements: a prize, chance, and consideration (payment).

California courts have reinforced this broad definition in cases such as Western Telcon, Inc. v. California State Lottery and Gayer v. Whelan. These decisions underscore that any arrangement meeting the legal definition of a lottery is subject to criminal penalties unless specifically exempted.

Expanded Definitions: Grab Bag Games and Modern Schemes

California Penal Code Section 319.3 broadens the definition of lotteries by specifically including "grab bag" games. These are popular in the sports memorabilia and gaming community, where customers purchase sealed bags or boxes with a chance of receiving a rare or valuable item. Not all bags contain prizes, and the outcome is based on chance. When valuable consideration is exchanged for the possibility of a prize, it is classified as a lottery under California law.

Prohibited Conduct Under Penal Code Sections 320–326

The core prohibitions on lottery operations are found in Sections 320 through 326 of the Penal Code. These laws make it illegal to:

• Organize, conduct, or manage a lottery (Section 320)
• Advertise or promote unauthorized lotteries (Section 321)
• Maintain a lottery office or sell lottery tickets (Section 323)
• Possess lottery-related paraphernalia (Section 324)
• Use buildings for illegal lottery purposes (Section 326)

Violating these sections may result in misdemeanor charges, fines, and in some cases, forfeiture of property involved in the activity. Section 325 specifically authorizes the state to seize and retain proceeds and equipment used in illegal lotteries.

Exemptions: When Lotteries Are Allowed

While the general rule is prohibition, California law does allow certain exceptions. The most prominent is the California State Lottery, which is exempt from these restrictions under Government Code Section 8880.6. This state-run lottery operates legally and provides funding for public education through a regulated system.

Other legal exemptions include:

• Charitable raffles conducted by qualified nonprofit organizations
• Savings promotion raffles by banks or credit unions (provided no interest is deducted and participation is tied to deposit accounts)

These exemptions are narrowly defined, and organizations must follow detailed rules to avoid legal exposure.

Constitutional and Judicial Backing

The California Constitution reinforces the prohibition of unauthorized lotteries. Article IV, Section 19 states that the Legislature may not authorize lotteries, except for the state lottery and qualified charitable raffles. This reflects a broader public policy goal of minimizing gambling-related harms and ensuring transparency and fairness in any lottery-related activity.

Court rulings have continued to uphold these standards. In California Gasoline Retailers v. Regal Petroleum Corp., the court reaffirmed the importance of the "chance" element in lottery cases. The consistent application of the prize-chance-consideration formula has helped create a clear legal test for identifying illegal lotteries.

Related Legal Concepts: Aiding and Abetting

It is important to understand that individuals do not need to organize a lottery directly to face legal consequences. Under California Penal Code 31 aiding and abetting, a person who assists, encourages, or facilitates the operation of an illegal lottery can also be held criminally liable. This could include advertisers, venue owners, or even third parties who promote or sell access to illegal schemes.

Lottery Revenues and Jeopardy Determinations

When illegal lotteries generate significant profits, the state may pursue civil actions in addition to criminal charges. Under tax law, certain gains can be subject to early assessments or asset seizures. This concept is related to jeopardy determinations under California Revenue and Taxation Code 32311, where the government acts quickly to secure revenue at risk of being lost. Illegal lottery earnings may trigger this type of enforcement if fraud or concealment is suspected.

Lottery Law Attorneys in California: Bulldog Law Is Ready to Help

If you are under investigation for operating or participating in a lottery in California, or if you're unsure whether your business model crosses legal boundaries, Bulldog Law can help. Our experienced criminal defense attorneys understand the full scope of California's gambling and lottery laws, including aiding and abetting liability and asset forfeiture issues. We can assess your case, explain your legal options, and develop a strong defense strategy tailored to your circumstances.

Whether you're a business owner facing scrutiny or an individual caught up in questionable promotional campaigns, our team provides the clarity and protection you need. Contact us today for a confidential consultation.